Frost Law
The IRS recently issued an alert about increased fraudulent charitable contribution schemes, particularly those involving ownership interests in closely held businesses marketed as “Charitable LLCs.” These schemes often target high-income taxpayers and promote invalid tax deductions by retaining control over the donated assets or reclaiming them later.
Concerned about the legitimacy of a charitable giving opportunity? Frost Law can help you navigate complex tax regulations and avoid fraudulent schemes. Contact us today at (410) 497-5947 or schedule a confidential consultation with our team of tax attorneys.
Common red flags include transferring assets to an LLC, donating nonvoting membership units to a charity while retaining control of the voting rights, and receiving personal benefits from the transaction. Promoters may also use misleading appraisals to inflate the value of the donation.
The IRS warns that participating in such schemes can lead to audits, penalties, interest, or even criminal prosecution. Proper charitable deductions require complete relinquishment of control over donated assets and adherence to strict documentation rules, including appraisals for donations over $5,000.
Taxpayers are encouraged to scrutinize offers that promise tax-free benefits or involve complex entity creation. Reports of suspected scams can be filed using Form 14242, Report Suspected Abusive Tax Promotions or Preparers, or through the Treasury Inspector General for Tax Administration.
Protect yourself from charitable contribution scams. Contact us today at (410) 497-5947 or schedule a confidential consultation with our team.
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